Safe Withdrawal Rate Calculator

A safe withdrawal rate (SWR) is the percentage of your portfolio you can withdraw each year in retirement with high confidence that you won’t run out of money. The withdrawal amount is set in year one and then adjusted for inflation annually, regardless of market performance.

The 4% Rule

The 4% rule originates from William Bengen’s 1994 research and the subsequent “Trinity Study.” Using historical U.S. market data from 1926 onward, they found that a diversified portfolio (typically 50–75% stocks, remainder in bonds) survived every historical 30-year retirement period at a 4% initial withdrawal rate, adjusted for inflation annually. The worst-case starting years were right before major bear markets (1929, 1966, 1973, 2000).

Why 4% May Be Too Aggressive — or Too Conservative

Arguments for a lower rate (3–3.5%): Today’s bond yields and stock valuations may produce lower future returns than the historical averages used in the original studies. Early retirees with 40–50 year horizons face more risk than the 30-year period the 4% rule was designed for. International diversification (beyond U.S. markets) historically shows lower safe withdrawal rates.

Arguments for a higher rate (4.5–5%): Most retirees don’t spend a constant inflation-adjusted amount — spending typically decreases in later years. Social Security and pensions reduce the portfolio’s burden. Flexible spending (reducing withdrawals during downturns) significantly increases sustainability. The 4% rule was designed for the worst historical case; most periods support much higher rates.

Sequence of Returns Risk

The biggest threat to a retirement portfolio isn’t average returns — it’s the order of returns. A major bear market in the first few years of retirement forces you to sell shares at low prices to fund withdrawals, permanently depleting the portfolio. This is why the same average return can produce wildly different outcomes depending on when the bad years fall.

Mitigation strategies include: maintaining 1–2 years of expenses in cash or short-term bonds (a “bond tent”), reducing withdrawals during downturns, and using a dynamic withdrawal strategy rather than a fixed percentage.

Variable vs. Fixed Withdrawal Strategies

Fixed: Set your withdrawal in year one (e.g., 4% of $1M = $40,000) and adjust only for inflation. Simple, but doesn’t respond to market conditions.

Guardrails: Set upper and lower bounds. If your withdrawal rate drifts above 5% (due to portfolio decline), cut spending. If it drops below 3.5% (portfolio growth), give yourself a raise. Jonathan Guyton’s “guardrails” approach historically supports higher initial withdrawal rates.

Percentage of portfolio: Withdraw a fixed percentage of the current portfolio each year (e.g., always 4% of whatever the balance is). This never depletes the portfolio but creates volatile income — your spending drops 30% if the market drops 30%.

What This Calculator Shows

This calculator uses a constant real return model — it shows how your portfolio evolves if returns are steady at the rate you specify. Real retirement involves volatile returns, so think of these results as a baseline. For a more conservative analysis, use a lower expected return (3–4% real). The sensitivity table helps you see how different withdrawal rates affect portfolio longevity at your expected return.